FOREX TRADING

Good morning to all and welcome to our Daily FX Report. The rating agency Standard and Poor`s downgraded the credit rating of Greece and Portugal. For this reason, the EUR dropped versus most of its major counterparts. Furthermore we are going to report about the AUD, NZD, JPY and the USD.

Markets review

The AUD drooped for a third day against the JPY as the stocks and commodities tumbled and after the credit rating downgrades for Greece and Portugal. That spurred investors to shun higher yielding currencies. The AUD weakened 0.2% versus the JPY and traded at 85.18. Also the NZD decreased the most since February 2010 versus the USD as Standard & Poor`s, one of the world’s biggest rating agency, cut Greece`s credit rating to junk and reduced Portugal`s two steps. That is fueling concerns the debt laden nations are moving closer to default. The NZD weakened 0.2% against the JPY and reached 66.20 and the USD strengthened to 0.7114. That was a profit of 1.7%. Today, we expect the consumer prices from Australia. Declines in the AUD may be limited, because economists expect gains in the first quarter. (more…)

EUR/USD

Current level – 1.3173

EUR/USD is in a downtrend, after peaking at 1.5146 (Nov.25,2009). Technical indicators are neutral, and trading is situated below the 50- and 200-Day SMA, currently projected at 1.4793 and 1.4169.

The consolidation pattern above 1.3201 has been completed and the downtrend renewed towards 1.30+ sentiment area, en route to 1.2880. Intraday resistance comes at 1.3219, but really important is the 1.3270-83 zone.

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EUR/GBP

Current level – 0.8659

Longer term biasis neutral for the pair, the wide range between 0,8600 and 0,9100 needs resolution.

Intraday:  Capped by short term bearish trendline. Needs a brake above 0.8680  to consider a bullish continuation up to 0.8750 resistance. Favour the downside.

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Today saw triple threat come into play: a significant additional sell-off in Chinese equities (that we neglected to mention this morning’s late Europe/Early US update), S&P cut its ratings on Greek debt to junk and cut Portugal’s debt a notch as well, and the Senate committee’s grilling of current and former Goldman Sachs executives took a decidedly aggressive and at times nasty edge. This saw a capitulation in risk in the currency market and a strong surge in the most liquid bond markets.

There are enough optimists out there to keep Goldman stock from falling farther today, but other financial stocks were off about 3% on the day, and the S&P 500 index lost some 2.5% or more on the day as well, it’s worse performance since early February (which was itself a capitulation sell-off that saw the bottom in the market for the cycle the next day).

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Financial markets were shaken up in the Tuesday morning with risk-aversion dictating direction. The catalyst triggering the declines in the euro, the US equity indexes and drop in crude oil were credit downgrades Portugal and Greece – which was downgraded by S&P to junk status. The euro shed over 100-pips against the greenback from above the 1.3340-mark to slide toward the 1.32-level following the downgrades. Amid heightened uncertainty over the contagion in the Eurozone, traders scaled back risk across the board with crude oil sliding by over 2% to $82.41 per barrel.

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News and Events:

Pressure continues to mount on Greece as markets remained unconvinced that the EU and IMF aid package will come in time. Greek 2-year bond yields jumped to 13.53% and 1-year CDS rose to 1078. Worryingly Portugal ‘s and Spain CDS prices are now being pulled higher, increasing the markets concern over EU contagion. As to be expected the EUR remained choppy as news, analysis and comments hit the wire with regular frequency. In Asian sessions, risky assets sold off as an article in FT Deutschland reported that the Netherlands would support Germanys call for tougher austerity measure in return for financial aid. Yesterday German Chancellor Merkel said Germany would support Greece if preconditions were met as Germany was obligated to insure the stability of the EMU. Recent IMM data has shown that EUR short positions have increased and the longer the Greece situation goes without a resolution, the harder it will be for the EU and EUR to pull out of what G. Soros’ referred to as a ‘Death Spiral.’ (more…)

Daily FX Report

Good morning from Hamburg and welcome to our daily FX Report. The JPY and the GBP rose against most of its 16 major counterparts and the CAD is trading near the parity to the USD. Furthermore we are reporting about the EUR. However, as usual we wish you much success in trading today

Markets review

The CAD was within a cent of parity with its U.S. major counterpart as traders expected a signal that a bailout of Greece would succeed in preventing a financial crisis from spreading. This increased the demand for higher yielding assets. The CAD reached nearly a one for one basis against the USD and traded at 1.0003. During the last two months, the CAD could gain about 700 pips against the USD and touched on April 21st its highest level since June 2008 at 0.9131. Last week, the USD recovered as much as 0.6% after the Canadian inflation rate failed to keep pace with the expectations which were forecasted. Furthermore the CAD weakened as crude oil for the June delivery dropped as much as 1.6% after earlier gaining 0.6% to 85.63 USD a barrel. Currently, crude oil is trading at 83.95 a barrel. Furthermore the EUR could gain versus the CAD and reached 1.3410. It seems that the CAD tends to rise and fall similar to commodities and equities.

The GBP rose against the USD for the first time in three days after a report showed that the U.K. house prices rose in April for a ninth consecutive month. That solidified the expectations that the economic recovery is gaining traction. The GBP gained versus 13 of its 16 major counterparts.

The USD drooped 0.6% to 1.5473 and the EUR weakened 0.9% to 0.8621 after earlier reaching 0.8604. This was the strongest level since the end of January 2010. The gains for the GBP reduced its yearly losses against the USD to 4.4%.

The JPY dropped against its most traded counterparts as signals that the global economy is recovering were shown. This dented the demand for the currency as a refuge. The AUD traded near its highest level since September 2008 versus the JPY on speculation that U.S. data this week will show that housing market is stabilizing and consumer spending will raise in the first quarter. (more…)

EUR/GBP

Current level – 0.8681

Longer term biasis neutral for the pair, the wide range between 0,8600 and 0,9100 needs resolution.

Intraday:  Intraday support held bearish pressure on the cross. Possible bottoming process at this level and probably heading higher to 0,8750. Needs to hold on above 0,8600.

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EUR/USD

Current level – 1.3355

EUR/USD is in a downtrend, after peaking at 1.5146 (Nov.25,2009). Technical indicators are neutral, and trading is situated below the 50- and 200-Day SMA, currently projected at 1.4793 and 1.4169.

Still in the consolidation pattern above 1.3201 and the pair already tested 1.3421 minor resistance.The intraday outlook is negative for 1.3292, where a reversal for one more upward test in the 1.3450 are can be expected. The overall bias on the 4 h. chart remains bearish.

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The greenback was mixed at the start of the week, with traders looking ahead to a barrage of economic reports due out later in the week. The US equity bourses traded flat in a quiet session while crude oil edged up marginally higher. The Asian stock markets were sharply higher overnight, with Tokyo’s Nikkei index surging by 2.3% and the Shanghai Composite index higher by more than 1.6%.

The key highlights for the week ahead will be the FOMC monetary policy announcement on Wednesday and the US Q1 GDP report due out on Friday. The Federal Reserve is expected to leave interest rates unchanged when it announces the results of its policy deliberation at 2:15 PM on Wednesday. The key focus will be in the language of the FOMC’s accompanying policy statement, with traders eyeing for the removal of the Fed’s oft-repeated mantra to “leave interest rates at exceptionally low levels for an extended period of time”. The Fed will likely upgrade its outlook for the economy in light of recent improvements in US reports.

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Forex valuations are holding the April ranges, with and price points that have held steady throughout the month. We can actually go back into March on most pairs before anything sustainable has unfolded outside of gaps or volatile reaction to red-flag macroeconomic sound-bites.

The ability to hold these 4-hour chart ranges has been made easier by the fact that global risk markets are unwilling to sell any of the year-to-date profits, but are also struggling to attract enough speculative interest to be able to break out to new yearly highs and hold.

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Friday’s fall in the euro to $1.3202 was painful enough to inspire a rebound sufficient to reverse course for only the first day in seven. Today’s pullback marks the seventh drop in eight sessions for the single European currency as investors worry about the reality of aid for Greece from its European partners after its formal request last week.

Euro – The single currency has lost half a cent to $1.3325 as investors digest the flurry of news and analysis from over the weekend. While the gates of assistance may have been opened for the nation of Greece, so far it’s proving to be a mere trickle of aid as investors ponder the likelihood of individual governments over riding the EU promise of up to €30 billion of aid.

Holding his back firmly against the gate is the German Finance Minister who told the Bild newspaper in a Sunday interview that decisions lie in the balance meaning that the outcome was unassured and could therefore go either way. The market continues to maintain a weak bias for the euro so long as the uncertainty prevails. Meanwhile his Greek counterpart warned investors banking on a sovereign default would lose their shirts. 

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FX Highlights

• The USD is trading mostly lower as the G-20 communiqué says the global recovery is better than anticipated and stock markets trade higher, EUR trades lower awaiting fresh news on the Greek debt as Greek credit spreads continue to widen to a new record high, some press reports suggest Germany may reject aid for Greece, investors await Merkel’s comments on Greece at 13:00 GMT, Canada’s Finance Minister Flaherty says the G-20 fears current Greek aid plan is insufficient, GBP trades higher supported by report of rising UK house prices, commodity currencies trade higher tracking firmer equities, higher price of gold and crude and Yuan revaluation speculation, Flaherty says China will likely revalue the Yuan, JPY trades lower pressured by a surge in the Nikkei, signs of improving global recovery competes with Greek debt worries for FX price direction
• Japan’s March corporate service price index rose by 0.5%,JPY lower
• German/Greek ten year government bond spread hits new record high of 663bps, The Times reports that the Greek meltdown is in danger of spreading, Harvard Professor Rogoff says that Greek rescue won’t be the last as focus shifts to Ireland and Spain, EUR lower
• UK Hometrack house prices rose 0.2% in April, rising house prices and higher UK inflation may encourage the BOE to hike rates before year-end, UK inflation rate rose by 3.4% March, GBP higher
• SNB’s Jordan says interest rates are right now, he is against excessive CHF rise, CHF lower
• ECRI growth gauge rose to 133.0 from 131.3 last week confirming the recovery is on track
• NABE says ¼ of US employers plan to begin hiring
• US equity markets set to open higher, European equities 1% higher, Nikkei closed 251 points higher

Upcoming Events

• US – Monday, no major US economic data is due for release today
• CAN – Monday, no major Canadian economic data is due for release today

By Michael J. Malpede

Easy Forex

Michael J. Malpede is Chief Market Analyst with Easy-Forex® and has previously been featured on Bloomberg TV, Bloomberg radio, Reuters, MarketWatch, Wall Street Journal, Chicago Tribune, Chicago Sun Times, Toronto Star and Nikkei press. In analyzing the markets, he draws from 29 years of Foreign Exchange Research as a Foreign Exchange Analyst.

Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. This report is provided by Easy- Forex® for informative purposes only. In no way it is a recommendation by Easy-Forex® for you to engage in any trade. It is your sole responsibility and you will have no claims with regards to this report against Easy-Forex®. If you do not agree to this, you are strongly advised not to use this report. Hence, Easy-Forex® shall not be held responsible for any outcome of trading decisions, in regards with this report or similar reports.

Euro 1.3380

Initial support at 1.3121 (Apr 29 2009 low) followed by 1.2965 (Apr 28 2009 low). Initial resistance is now located at 1.3422 (Apr 22 high) followed by 1.3692 (Apr 12 high)

Yen 94.20

Initial support is located at 92.74 (Apr 22 low) followed by 91.60 (Apr 19 low). Initial resistance is now at 94.32 (Apr 23 high) followed by 94.79 (Aug 5 High).

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U.S. Dollar Trading (USD) very strong US data sent stock markets higher and helped the USD/JPY regain the Y94 level. Risk currencies though did well as the Euro led the rest of the market higher against the safe haven Dollar. March New Home Sales jumped over 20% to 411k vs. 330k forecast. March ex-Trans Durable Goods surged 2.8% vs. 0.7% expected. In US stocks, DJIA +69 points closing at 11204, S&P +8 points closing at 1217 and NASDAQ +11 points closing at 2530.

The Euro (EUR) was well supported when Greece Activated its Aid package in Early Europe although initial gains were limited and the market waited for supportive comments from France and Germany before pushing higher into the US close. April IFO was very strong at 101.6 vs. 98.8 expected. Overall the EUR/USD traded with a low of 1.3202 and a high of 1.3400 before closing at 1.3370. Looking ahead, ECB President Trichet Speaks.

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